Buying a house in Texas involves more than saving for the down payment. Closing costs add thousands of dollars to the total amount you need at the table, and many first-time buyers are caught off guard by the number of line items that appear on the settlement statement. If you are shopping for a home in Houston, Dallas, Austin, San Antonio, or anywhere else in the state, understanding what these costs include and how much to budget will help you avoid last-minute surprises.
What Closing Costs Actually Are
Closing costs are the fees and charges you pay on the day the property officially changes hands. They cover everything from the lender’s processing fees to the title company’s work verifying that the seller actually owns the property free and clear. In Texas, buyer closing costs typically range from 2 to 5 percent of the home’s purchase price. On a $350,000 home, that means you could pay anywhere from $7,000 to $17,500 on top of your down payment.
Seller closing costs are separate and generally higher, running about 6 to 10 percent of the sale price, mostly because the seller traditionally pays the real estate agent commissions. As a buyer, your costs are driven primarily by mortgage-related fees, title and escrow charges, and prepaid items like property taxes and homeowners insurance.
Lender Fees
The largest chunk of your closing costs usually comes from the lender. These fees cover the cost of originating, underwriting, and processing your mortgage.
The loan origination fee is what the lender charges for creating and processing your mortgage. It typically runs between 0.5 and 1 percent of the loan amount. On a $300,000 loan, that could be $1,500 to $3,000.
The appraisal fee pays for a licensed appraiser to evaluate the property’s market value. Lenders require this to make sure the home is worth what you are paying. In Texas, appraisal fees typically run $400 to $600, though larger or more complex properties may cost more.
Credit report fees are small, usually $30 to $75, but they still show up on your closing statement. The lender pulls your credit history to determine your interest rate and loan eligibility.
Discount points are optional. Each point costs 1 percent of the loan amount and reduces your interest rate by roughly 0.25 percent. Buying points makes sense if you plan to stay in the home long enough for the monthly savings to exceed the upfront cost. On a $300,000 loan, one point costs $3,000.
Title and Escrow Charges
Title-related fees protect both you and the lender from any ownership disputes or liens on the property.
The title search and examination fee covers the cost of researching the property’s ownership history to make sure there are no outstanding claims, liens, or encumbrances. This typically costs $200 to $400 in Texas.
Title insurance is a significant line item. Texas is one of the states where title insurance premiums are regulated by the state, meaning the cost is the same regardless of which title company you choose. On a $350,000 purchase, the owner’s title insurance policy costs approximately $1,935. In most Texas counties, the seller customarily pays for the owner’s title insurance policy, but this is a negotiable term, not a legal requirement.
The lender’s title insurance policy protects your mortgage company and is paid by the buyer. This is typically less expensive than the owner’s policy and is required for all financed purchases.
Escrow and closing fees go to the title company or attorney who manages the closing process. These typically range from $400 to $900.
Prepaid Items and Escrow Reserves
Prepaid items are costs you pay in advance at closing to cover upcoming expenses. These are not fees in the traditional sense but rather advance payments for things you would owe anyway.
Prepaid property taxes can be one of the largest closing cost items in Texas because property tax rates are among the highest in the country. Lenders typically require you to fund an escrow account with several months of property taxes. If you close in January on a $400,000 home in a county with a 2.1 percent effective tax rate, your prepaid property tax could exceed $7,000. Close in November and it drops to around $1,400.
Prepaid homeowners insurance requires you to pay the first year’s premium upfront, plus an additional one to two months into the escrow reserve. In Texas, where average annual homeowners insurance premiums are among the highest in the nation due to storm and wind risk, this can add $2,000 to $4,000 to your closing costs.
Prepaid interest covers the daily mortgage interest from your closing date through the end of that month. Closing near the end of the month reduces this amount. If you close on the 28th, you pay two or three days of interest. Close on the 5th and you pay 25 days.
Texas-Specific Costs
Texas has a few unique features that affect closing costs compared to other states.
The option fee is a Texas-specific cost. When you sign the contract, you pay a non-refundable fee, usually $100 to $500, that buys you an option period of typically 5 to 10 days. During this time, you can have the home inspected and back out for any reason. This fee is typically credited toward the purchase price at closing.
Texas has no transfer tax or documentary stamp tax on real estate sales. Many states charge a percentage of the sale price as a transfer tax, but Texas does not, which saves buyers and sellers money compared to states like Florida, New York, or Pennsylvania.
Survey fees may be required if an existing survey is not available or the lender requires a new one. A residential survey in Texas typically costs $400 to $700. Some sellers provide an existing survey, which can save the buyer this expense.
How to Reduce Your Closing Costs
The most effective way to lower closing costs is to negotiate seller concessions. You can ask the seller to pay a portion of your closing costs as part of the purchase agreement. In a buyer’s market, sellers are more likely to agree, and credits of 2 to 3 percent of the purchase price are common. FHA loans allow seller concessions up to 6 percent, while conventional loans cap them at 3 to 6 percent depending on your down payment.
Compare lenders before committing. Title insurance premiums are fixed by the state, but origination fees, underwriting fees, and discount points vary significantly between lenders. Getting Loan Estimates from two or three lenders can save you hundreds or thousands of dollars.
Time your closing strategically. Closing near the end of the month reduces prepaid interest, and closing later in the year reduces prepaid property tax reserves. The difference can amount to several thousand dollars.
Ask about no-closing-cost mortgage options. Some lenders offer to cover your closing costs in exchange for a slightly higher interest rate. This increases your monthly payment but reduces your upfront cash requirement.
What the Closing Day Looks Like
On closing day in Texas, you will sit down at the title company’s office and sign a stack of documents. Before that meeting, you will receive a Closing Disclosure at least three business days in advance. This document itemizes every fee, prepaid item, and credit so you can review the numbers before signing.
You will bring a cashier’s check or wire transfer for the total amount due, which includes your down payment plus closing costs minus any seller credits or earnest money already deposited. The title company handles distributing funds to the seller, the real estate agents, the lender, and the various service providers.
After signing, the title company records the deed with the county, and you officially own the property. In Texas, most closings take 30 to 45 days from the date the contract is executed, though cash purchases can close faster.
Frequently Asked Questions
How much are closing costs on a $300,000 house in Texas?
Buyer closing costs on a $300,000 home in Texas typically range from $6,000 to $15,000, depending on your loan type, lender fees, and how much property tax and insurance you need to prepay at closing.
Does the buyer or seller pay closing costs in Texas?
Both parties pay closing costs in Texas. The buyer pays mortgage-related fees, lender’s title insurance, and prepaid items. The seller typically pays the owner’s title insurance, real estate agent commissions, and other transfer-related fees.
Is there a transfer tax when buying a house in Texas?
No. Texas does not charge a real estate transfer tax or documentary stamp tax. This is one of the advantages of buying property in Texas compared to many other states.
Can I roll closing costs into my mortgage in Texas?
Some loan programs allow you to finance a portion of closing costs, but this increases your loan amount and monthly payment. VA loans and USDA loans offer more flexibility for rolling in costs. Another option is a no-closing-cost mortgage with a higher interest rate.
What is the option fee in Texas real estate?
The option fee is a non-refundable payment, typically $100 to $500, that gives the buyer an option period of 5 to 10 days to inspect the property and back out for any reason. This fee is usually credited toward the purchase price at closing.